TWTR - Wells Fargo sees more conviction on successful Twitter-Musk sale after expert call

Wells Fargo has some continued conviction that Twitter's ( NYSE: TWTR ) $44B deal to sell to billionaire Elon Musk will close successfully, after revisiting an expert on the material adverse effects that Musk is leaning on in his full-court press to escape the transaction.

The bank's Brian Fitzgerald talked again with Prof. Robert Miller, whose writings on MAE have been cited dozens of times by the Delaware Court of Chancery - the jurisdiction set to try Twitter v. Musk et al. on Oct. 17.

A recent wave of developments in the case - including Musk's amendment of his counterclaim to include allegations from Twitter ( TWTR ) whistleblower Peiter "Mudge" Zatko - hasn't swayed Miller from a view that success for Musk is unlikely in the case, since Miller believes Musk's case consists of "four likely losing arguments."

Musk's amended counterclaim argues for fraud, supporting rescission of the deal; breaches of representations, which would give a contractual right to terminate; violation of the Texas Securities Act, supporting rescission of the deal; and breach of covenants, which would also give a contractual right to terminate.

But it's "exceedingly difficult" to prevail on fraud claims in Delaware, Miller told Wells Fargo. As for breach of representation, it's Musk's burden to prove that representation makes up a material adverse effect, but Miller notes Musk is also arguing that the crucial "monetizable daily active users" ((mDAU)) metric "has little relation to the company's current or future value," undercutting the MAE argument.

Even if Zatko's allegations are true, Miller told Wells Fargo, Twitter's SEC filings statements on operating risks are carefully qualified.

The MAE arguments are a "high hurdle," and Miller has confidence in the court's "ability and willingness" to compel specific performance from Musk on the deal.

Down 1% on Friday, Twitter's price per share of $40.98 sits at a 24% discount to Musk's committed deal price of $54.20 per share.

Musk's latest amendment - to allow facts around Twitter's ( TWTR ) $7.75B severance payment to Zatko - is headed for a Tuesday hearing to sort out additional discovery on the matter .

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